1. Social 10­1 ­ Chapter 10 ­ Economic Globalization.
notebook November 02, 2023
Chapter 10
Economic Globalization
Slide 1
• In order to achieve any kind of prosperity, economic
globalization and its impacts must be examined.
• Therefore, we must explore:
Ȃ the foundations of economic globalization
Ȃ people of economic influence
Ȃ contemporary economic globalization
Slide 3
Establishment of a New International Monetary System
• After WWII, the democratic Allied countries became
concerned about rebuilding the global economy after the
war.
• In 1944, 44 Allied countries met at Bretton Woods, New
Hampshire in the United States to discuss the postwar
economic order.
• Result: Bretton Woods Agreement = established a system
of rules, institutions, and procedures for the postwar
global economy.
• The Bretton Woods Agreement effectively established a new
international monetary system ‑ a global network of
institutions to promote international trade and the regulation
of currency (money) among Western countries.
Slide 5
Unit 3 Inquiry Question:
To what extent does globalization contribute to
sustainable prosperity for all people?
• Prosperity ‑ generally means good fortune.
‑ Doesn't have to do with money (health, happiness, etc.)
‑ Means different things for different people
• Sustainable ‑ something that can be maintained in the
future.
Sustainable prosperity = practising stewardship
(accepting responsibility) of the environment and
resources so that future generations are able to achieve
prosperity
= living a satisfying life that can be maintained in the future
Slide 2
Foundations of Economic Globalization
• A number of events since the end of WWII (1945) have led to
the development of contemporary economic globalization:
Ȃ Establishment of a new international monetary system
Ȃ Creation of the World Bank and the International
Monetary Fund
Ȃ Expansion of the free market economy into former
Soviet‑bloc countries at the end of the Cold War
Ȃ Impact of new technologies on the movement of money
around the world
Slide 4
• The 44 countries at the Bretton Woods conference agreed
to a common currency system where each country would
maintain a fixed exchange rate for its currency = the value
of a country's currency is set by the government.
• Each country also agreed that the fixed exchange rate
would be based on the gold standard = all printed money
must be backed by gold reserves so that if anyone wanted to
cash out paper currency, this could happen.
Slide 6
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1. Social 10­1 ­ Chapter 10 ­ Economic Globalization.notebook
• In modern economies, the gold standard did not work
properly because countries were limited in their printing
to the amount of gold they actually had.
• In times of crisis, a country needed to go into debt to
borrow money and like a person paying with credit, pay it
back later.
• Unlike people though, governments can simply print more
money and if a government has too much debt, then the
value of its currency will drop.
The result is inflation = where the country ends up with
more currency, but each unit of currency buys less.
Slide 7
The Value of Money
• The real value of money lies in the wealth of the country and
in what the dollar can buy here and in other parts of the
world.
• However, the value constantly changes on international
markets.
• The most powerful regions of the world ‑ such as Japan, the
European Union and the US ‑ have the strongest economies
and currencies.
• Therefore, their currencies are worth more than the Canadian
dollar.
• The US dollar has been the world standard for all currencies
since the end of WWII and many businesses around the world
use and accept the US dollar in addition to or instead of their
own countries' currencies.
Slide 9
• The World Bank is made up of two institutions:
ͳǤ International Bank for Reconstruction and
Development (IBRD) = helps low‑ and middle‑income
countries
ʹǤ International Development Association (IDA) = focuses
on the world's poorest countries
• It has claimed to have accomplished many things since its
inception.
Slide 11
November 02, 2023
Floating Exchange Rates
• By the 1960s, the US was facing high inflation and on August
15, 1971, President Richard Nixon "closed the gold
window".
• This meant that the American government was no longer
going to redeem their paper currency for gold.
• By 1976, all the world's major currencies had floating
exchange rates = currency's value was decided on the
foreign exchange market, which means supply and demand by
those who want to buy and sell it on the market.
Slide 8
Creation of the World Bank and the International
Monetary Fund
• The Bretton Woods Agreement also created the International
Bank for Reconstruction and Development, (later split into
two) = World Bank = an agency of the United Nations, but in
practice is an independent organization controlled by its 189
member countries.
• Provides loans to less developed countries that are in
financial difficulty, but to get these loans, the countries
usually have to meet certain political and economic
conditions (ex. adopting free‑market practices, increasing
democracy).
• A common requirement is to reduce government spending on
social programs ‑ what are the potential drawbacks to this?
Slide 10
International Monetary Fund (IMF)
• The Bretton Woods Agreement also created the International
Monetary Fund (IMF) = a UN agency that works together with
the World Bank to bring stability to international monetary affairs
and to help expand world trade.
• Funded primarily through quotas (proportional shares) that
member countries pay and is based on the economy; thus larger
the economy, the more that country pays and the more control is
has in the IMF (ex. USA ‑ 17.5%).
Slide 12
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1. Social 10­1 ­ Chapter 10 ­ Economic Globalization.notebook November 02, 2023

Role of the IMF

• Monitors exchange rates and provides short‑term financial
assistance. World Bank IMF
• There are also different perspectives on how the IMF is actually
contributing to global prosperity for all. • In charge of long‑term • In charge of monitoring
financial assistance for exchange rates and providing
Benefits: countries in need short‑term assistance
• Works to "foster global monetary co‑operation, secure financial
stability, facilitate international trade, promote high employment • Fund specific infrastructure • Demand reforms in a country
and sustainable economic growth, and reduce poverty" by projects
Ȃ surveillance ‑ assesses and each country's economic
situation annually • Increase growth and reduce • Promotes good governance
Ȃ technical assistance and training ‑ usually free in areas of poverty in developing and gets rid of corruption
banking and financial system supervisions and regulation
countries
Ȃ financial assistance ‑ offers funds and loans to member
countries

Slide 13 Slide 14

Criticisms of World Bank

• World Bank operates under the assumption that the free
market system can bring prosperity to all countries.

• More developed nations like the USA have more political

influence and can lead the Bank to favour trade relations
with countries like China that has a horrible human rights
record.

Slide 15 Slide 16

Criticisms of the IMF Expansion of the Free Market Economy into Former
Soviet‑bloc Countries at the End of the Cold War
• The IMF deliberately supports capitalist military dictatorships
• The end of the Cold War in 1989 was another factor in the
friendly to American and European corporations.
expansion of economic globalization (Cold War ‑ ideological
• Often advocates austerity programs for countries in financial
war between communism and capitalism/democracy).
trouble.
• Does not actively promote democracy, human rights, and
• Communism ‑ centrally planned economic system =
labour rights (ex. corrupt military dictatorships are given
government makes all economic decisions.
loans).
• Controlled by the USA and more developed nations, whose
• End of Cold War led to many Soviet‑bloc countries embracing
main focus to protect their corporations and interests.
the free market economy.
Conclusion
• During the Cold War, there were only three major trading
• Overall, the IMF's success is limited. blocs ‑ Europe, North America and Japan.
• 100 countries have experienced a banking collapse since
1980 and this is far more than any other previous time in
• Now almost the entire world is part of the global economy.
history.

Slide 17 Slide 18

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1. Social 10­1 ­ Chapter 10 ­ Economic Globalization.notebook
China
• The free market expanded even further into
communism China when they opened their doors to
Western business in the 1980s.
• By 2001, China decided to join the World Trade
Organization and this made China a full partner with
other major world economies.
• Also added a billion people to the world markets.
India
• The second largest country in the world also began
to enter the new global economy and became the
world leader in providing outsourcing services for
Western companies through the use of telephone
and computer technology.
• While China became the world leader in
manufacturing goods for the Western world.
Slide 19
• By the 1990's, technologies like the Internet has
transformed how people make, spend, and invest money.
• People can buy and sell stocks, bonds, mutual funds, and
more recently bitcoins online instantaneously.
• There are tremendous opportunities for economic growth,
but this also means that economies around the world are
more vulnerable than ever before ... Why/How??
Slide 21
John Maynard Keynes
• A British economist that developed theories that called for a
large role for the government in the economy.
• He argued that falling wages resulted in decreased spending.
• Keynes also believed that governments needed to directly
intervene in the economy to increase total spending and
prevent a recession = a period of reduced economic activity
lasting longer than two business quarters (six months).
• His arguments have formed the basis of the rationale for
government spending and taxation to stabilize the economy.
Slide 23
November 02, 2023
Impact of New Technologies on the Movement of
Money Around the World
• The growth of television, computers, the Internet, cellphones
and satellites have made borders almost irrelevant and the
world seem smaller, culturally and economically.
• This has decentralized international money markets =
markets in which funds that are loaned for a short time to
businesses or government are bought and sold (ex. Short‑
term bonds and certificates of deposit are examples of
instruments traded in money markets).
• Instead of going through an investment dealer, people now
use their personal computers to invest in companies and
governments around the world.
Slide 20
People of Economic Influence
• Ideas also contributed to the development of economic
globalization.
• Two economists with very distinct and opposing ideas about
economic freedom have influenced economic globalization
today.
ǽ John Maynard Keynes
ǽ Friedrich Hayek/Milton Friedman
Slide 22
BOOM
Spending Taxes
BUST
Spending Taxes
• During times of boom, to prevent inflation, governments
need to reduce spending and increase taxes.
• During times of bust, to prevent a further recession,
governments need to increase spending and decrease taxes.
Slide 24
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1. Social 10­1 ­ Chapter 10 ­ Economic Globalization.notebook November 02, 2023

Friedrich Hayek/Milton Friedman

• Believed that when governments try to plan or
control societies, those societies are doomed to
failure.
• Based on theories on the failures of totalitarian regimes like
the Soviets and Nazis, which had absolute control of every
aspect of society.
• Argued that human societies are simply too complex to be
planned and that a free society with the least amount of
government intervention is best.
• Idea that the role of government must be limited in any
society became generally accepted in the Western world.

• Therefore, a market economy was best!

Slide 25 Slide 26

Example of Hayek's ideas in action ‑
• Britain in 1979 under Margaret Thatcher
ε Her Conservative government reduced government
spending, taxes and government regulation = more like
Adam Smith's ideas.
ε Privatized many government‑owned industries.
ε Reduced the power of trade unions.
ε Cut back on welfare.
ε Encouraged growth of small businesses.
Economic theories have been embraced by different
governments during different times in history.
• After WWII, Keynes' theories became the foundation for a
managed and welfare‑oriented form of capitalism.
• By the late 1960s, inflation and weak productivity made
many question these ideas and Hayek's ideas became
popular.

What kind of society would be the result of these economic

policies?

Slide 27 Slide 28

Contemporary Economic Globalization

• The economies of the world have become more
integrated over the past 20 years.

• For example, of the 193 countries in the world, 190 have

signed at least one trade agreement.

• What does this mean for contemporary economic

globalization?

Slide 29

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1. Social 10­1 ­ Chapter 10 ­ Economic Globalization.notebook
Regulation of Freer Trade ‑
• After WWII, many countries looked for ways to encourage
peaceful relations and help the global economy by opening up
trade between countries.
• 50 countries around the world, created the United Nations
and in 1947, 23 member countries established a UN agency
called General Agreement on Tariffs and Trade (GATT).
• GATT members agreed to gradually eliminate tariffs and other
trade barriers between themselves.
Tariff ‑ a tax imposed on imports to increase their
prices and thus reduce competition with domestic
products.
Slide 30
Freer Trade Between Canada and the United States
• In 1989, Canada and the United States entered into the Free
Trade Agreement (FTA) ‑ opened up trade between us and
removed many tariffs.
• Canada = wanted access to large US market
• USA = wanted Canada's vast natural resources
• However, Canada was able to keep the right to protect its
cultural industries and other sectors like education and health
care.
• It also excluded certain resources like water.
Slide 32
• Immediately eliminated half of the trade barriers between
the three countries and would phase out the remaining
barriers in 15 years.
Slide 34
November 02, 2023
• GATT operates according to four principles:
ε Conducting trade in a non‑discriminatory manner
ε Treating imported goods from a member country in the
same manner as similar domestic goods
ε Protecting domestic industries (where this applied)
through tariffs and not through means such as import
quotas or fees.
ε Requiring any country that applied for membership to
present a list of tariffs and other trade restrictions
imposed on member countries
• By 1995, GATT had a membership of 131 countries and
accounted for more than 90% of international trade and
became the World Trade Organization (WTO).
Slide 31
• Controversy in Canada was immediate.
• Some believed that the deal would undermine Canada's
sovereignty and that we would gradually lose our political
independence to the US.
• In 1994, Mexico was added to the agreement and it became
the North American Free Trade Agreement (NAFTA)
Ȃ Became the largest free trade area in the world with a
population of 360 million people in 1994.
EXPORTS = 200%
EXPORTS = 25%
Slide 33
Slide 35
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1. Social 10­1 ­ Chapter 10 ­ Economic Globalization.notebook November 02, 2023

United States‑Mexico‑Canada Agreement (USMCA)

• Updated and replaced NAFTA in 2018.
• Basically modernized NAFTA to include other provisions
such as intellectual property, digital trade and increased
environmental and worker regulations.
• Each country made different concessions to reach the deal.
Ȃ For example, Americans got more access to the Canadian
cheese market. Canadian online shoppers saw an increase in
duty‑free limits from $20 to $150.
• There was also an agreement that the deal would be
reviewed by the three nations every six years.

Slide 36